Commercial vs. Personal Umbrella Insurance

Accidents happen in life, and the best way to handle them is to be prepared beforehand. Umbrella insurance is a form of liability insurance that kicks in when other policies – like homeowners or auto – fall short. If a major claim or lawsuit against you goes above the limits of your relevant insurance, umbrella insurance steps in to protect you and your assets. However, there are two different types of umbrella insurance: commercial and personal. Which should you buy? Which one is right for you?

What is commercial umbrella insurance?

Most businesses already have liability insurance policies in place. But what happens if you’re held liable in an accident, and the cost goes above what you’re covered for? Your business may be sued to cover the excess liability. Commercial umbrella coverage gives you extra liability insurance to cover the difference and avoid lawsuits. Not only will this protect you from out of pocket expenses related to the incident, but it will protect you from the legal fees involved with going to court over it.

How is it different from personal umbrella insurance?

Personal umbrella coverage protects your personal assets. This includes your primary residence, cars, motorcycles, seasonal or secondary homes, most watercraft, recreational vehicles, and rental dwellings. You’ll notice that this doesn’t include your business. So, if a customer falls and trips in your business, you’ll be open for a lawsuit. If a misguided claim in an advertisement sparks a landslide of angry customers, you may be facing many lawsuits.

Commercial umbrella insurance covers your business specifically and your business assets. These policies will cover any general commercial liability that includes bodily injury, property damage, attorney’s fees, and more.

Which should I get?

This is an easy question to answer. You should get commercial insurance if you own a business. This includes retail stores, salons, contractors, offices, restaurants, motels, service stations, religious institutes, and much more. If you have an employee, then you should get a commercial umbrella policy.

If you are only looking to cover your home and those who reside in it, then purchase a personal umbrella policy. Having a personal policy will cover you if someone gets hurt inside of your home. If you have people who come to work on your home, you might consider getting this sort of insurance. This can be a cleaning service to a lawn care.

How much does it cover?

This is the last main difference for personal and commercial umbrella insurance is the coverage amount. Most of the time, personal policies will cover a person up to $1 or $2 million. This is a substantial amount, which is great for personal property. There is an option to purchase more, but this is the average coverage. It’s a significant amount, but not nearly enough if you own a business.

If you own a business, you’ll want all of your assets covered. Chances are, you’ll have a much higher net worth if you own a business. Your net worth is calculated by adding all of your assets and properties, followed by subtracting your liabilities and debt. If this number exceeds the amount of coverage you have, then you’re under-protected. Business umbrella policies can cover up to $15 million where as personal may only cover up to $5 or $10 million. If there are more people in your business, you’ll want the higher coverage to avoid a lawsuit due to debt.